ESTATE PLAN

Ensuring things have been properly planned for our end of life can not only save large amounts of money but can also make the process so much less complex for those left behind.
Wills, trusts, beneficiary designations, power of attorneys, and representation agreements all need to be reviewed and utilized where appropriate to ensure the transfer at the end of life happens in the best way possible.
For those with philanthropic desires planning for how to contribute to charities directly or through a foundation should also be explored.

TAX PLAN

Minimizing the amount of income tax paid should also be part of each financial plan. It is completely legal to try to avoid paying tax through various measures like RRSP deductions, interest deductions, using tax free savings accounts, etc. Tax evasion is illegal and could result in serious legal issues.
As income from various sources can be taxed at different levels it is important to structure investments and holdings in the most tax efficient way.

Long-term planning is also needed when assets are to be sold in the future that have large embedded capital gains. There may be ways to reduce or defer the income tax on these larger items with proper tax planning.

INSURANCE PLAN

Insurance is important in providing protection for families as well as protecting the wealth that is accumulated. Insurance can also be used to enhance the maximization of wealth especially due to insurance death benefits being paid out on a tax-free basis if structured properly.

A needs analysis should be part of a financial plan to determine what types of insurance are needed and whether existing plans are the most appropriate. This should encompass looking at the life insurance, disability insurance, critical illness and long-term care insurance needs.

REAL ESTATE PLAN

Real estate is one of the largest portions of wealth in Canada and is an important component of many Canadians wealth.

Having a plan for the accumulation of real estate is important whether this is just a principal residence or multiple properties. Building the equity in real estate is important as it provides options for other opportunities.

Rental revenue for many Canadians is an important source of income.

CHILDREN’S SAVINGS PLAN

Saving for children is very common for Canadians and different options exist. Most commonly used is the Registered Education Savings Plan but there are also informal trust accounts and open savings accounts.

Depending on the amount being saved strategic use of these plans should be made to maximize the grants and free money available from the government as well as other tax implications of saving for children.

PENSION PLAN

Pensions are a significant part of many Canadians financial plans and these pensions including private and government pensions need to be factored into the financial plan and their value maximized.
Plans around when to retire and what options to take in private pensions can be complex and need careful consideration and exploration. In some cases, it may also be advantageous to explore taking the commuted value of a private pension plan and transferring this to a locked-in RRSP or LIRA.
Similarly, with the Old Age Pension and Canada Pension options exist as to when to begin these pensions which should be assessed.

FEE PLAN

It should be clear in the financial plan what the fee levels will be for the work being provided by the financial planner as well as the products that are being used as part of the financial plan.
Ideally the financial planner will be able to demonstrate that by paying these fees the client is better off than having not paid these fees. The client should feel that the package of services being provided by the financial planner are well worth the fees being paid as evidenced through good rates of return, a sense of progress towards goals and a feeling of security in knowing that each area of the financial plan has been addressed and is being monitored.

INVESTMENT PLAN

The investment plan will look at what type of investments to use, the appropriate risk levels, the types of plans to use (RRSPs, RIFs, TFSAs, Open or Taxable accounts, etc)
Investments outside of real estate (see real estate plan) are an important part of a financial plan. Real estate is a more illiquid investment as it can be more difficult to sell in a shorter time frame. Other investments can provide more liquidity.
The investment plan should also provide a goal rate of return for the investments that can be measured against the actual performance and an agreed upon market benchmark return.

MORTGAGE PLAN

Mortgages have proven very useful to many Canadians by allowing them to invest in personal use properties, rental properties, recreational properties and commercial properties. Significant wealth has been built up especially over the last 20 years in Canada by investing in real estate.
As with other debt there are strategies and methods that can be utilized to assist in paying down mortgage debt in a more efficient manner and these should be explored in this part of the financial plan.
As equity is built up many people have used this equity to allow them to purchase additional real estate. Therefore, it is advantageous from many perspectives to try to build up the equity in real estate as efficiently as possible.

DEBT PLAN

Having a plan to pay down consumer debt and unsecured lines of credit is also very important. In Canada we have an obsession with debt which has been fueled by low interest rates for the last decade. Many peoples monthly credit card, car loans, and other installment loans and unsecured lines of credit payments are large portions of their monthly take home pay. Until these debts are under control and eventually paid down it is very difficult for many people to save at the levels, they need to in order to hit a meaningful financial independence number.
Various strategies and methods can be used to assist in paying down debt in a more efficient and methodical way. Of course, having a plan to stop building up debt is crucial and having a plan to eventually be out of consumer debt is the goal.

BUDGETING / CASHFLOW PLAN

Having a budgeting and cashflow plan is important for those that would like to maximize their savings and the accumulation and maximization of their wealth.
For most people it does take discipline to save and build wealth and starting with a budget and then monitoring the income and expenses against the budget brings clarity to the monthly actual financial situation. This then allows for spending adjustments to be made to allow the savings to occur at the necessary level to reach the financial independence goal.
As David Chilton described in the Wealth Barber it may be simpler and more advantageous for many people to turn the budgeting process upside down and start the budget with allocating between 10% to 20% of the gross income for savings (RRSP, TFSA and open accounts) and then live on the balance. In this way the saving component is prioritized similar to how a mortgage payment is usually prioritized. Unfortunately, most people budget the other way which is to deduct the various expenses from the income and then see if there is anything left over to save which many times is very little to nothing. Saving off the top and living on the balance is a great way to approach budgeting.

FINANCIAL INDEPENDENCE PLAN

Fundamental to a comprehensive financial plan is knowing what the target is or what is the amount of money needed for a person or couple to be financially independent. Sometimes we can equate retirement with financial independence, but it does not need to be the same thing. Some people do not plan to retire ever or until a much later age. Financial independence is a point where there is sufficient wealth accumulated to last for the projected life and also satisfy any transfers to heirs or philanthropic desires.
It is better to plan for a financial independence date rather than planning to never retire or to retire at a much later age. Life is unpredictable and even though the plan may be never to retire health and other issues can disrupt these plans and so it is better to have enough wealth accumulated at a reasonable age to then allow more flexibility around when retirement may occur.
Establishing an amount that is needed to be financially independent then allows us to determine how much needs to be saved on a regular basis to reach the financial independence goal.
Most important is to revisit this part of the plan every 6 months to a year to assess the progress towards the financial independence goal and make revisions if necessary.

Summary

Planwell Solutions

At Planwell we break everything down into four areas of wealth management:

Wealth Accumulation
Wealth Maximization
Wealth Protection
Wealth Transfer

Each of these areas encompass many solutions relevant to each area. Of course, this is not exhaustive but will give you an idea of some of the solutions that we employ for our clients.

WEALTH ACCUMULATION

Starting the process of accumulating wealth of course is important, especially if we would like to maximize our financial resources in the future. Starting a plan is relatively easy and sometimes this starts by simply opening a savings account as a child at a bank. At some point hopefully, it is realized this is not the path to building significant wealth, especially these days with almost no return on bank savings accounts.

We look forward to assisting each client with the process of accumulating wealth in the best way, using the right accounts depending on the goals. However, things get much better as we look at maximizing the wealth that is being built. Please check out the information in the Wealth Maximization section.

RRSPs
RIFs
TFSAs
RESPs
In Trust Accounts
RDSPs
Taxable accounts
Corporate accounts (business owners)
Holding companies (business owners)
Group RRSPs (business owners)
Mortgage planning

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WEALTH MAXIMIZATION

Wealth maximization is very exciting for us as this is where a lot of the tools of excellent financial planning can be used. First, we need to have a financial plan. For us the financial plan is the cornerstone of accumulating wealth, maximizing wealth, protecting wealth and ultimately transferring the wealth.

Many things will be considered as part of the plan to maximize your wealth, such as do you have debt that needs to be reduced? Do you have a budget that you are following? What type of investments should you be using? How can your returns be maximized while risk is lowered? How can you achieve the best after tax returns? Which types of accounts should you be using? How much do you need to save and what rate of return do you need to achieve? What strategies can be used to improve your situation? As life changes for you what then needs to be done to modify your plan so that you stay on track with a good financial plan?

There are many components to maximizing your wealth and it needs to be updated at least once or twice a year.

Debt Reduction Planning:

Debt consolidation
Debt management

Budgeting:

Budget Worksheet
Creating a Financial Plan

Importance of Saving

Tax planning:

Flow Through Investments
Estate Freezes
Health and Welfare Trusts

Investments:

The Planwell Net Return Portfolios
Mutual funds
Stocks
ETFs
Bonds
GICs
Private Investments
Flow Through Investments
Segregated funds
Annuities
Real Estate

Insurance strategies:

Estate Bond
Funeral planning options

Retirement Planning:

Pensions
Old Age Security and CPP
Property Tax Deferral

Life Changes:

Divorce
Bereavement
New job or job loss
Downsizing

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WEALTH PROTECTION

It is great to maximize the accumulation of wealth. However, we also need to be realistic that disruptions to our plans can occur and we need to plan as well as we can for unforeseen occurrences.

Everybody’s situation is unique and different risks needs to be assessed and minimized based on the cost/benefit of doing so. As your wealth grows it is prudent to put measures in place to protect against its loss or depletion.

What measures need to be used to protect your wealth as it grows? What measures need to be used to protect you and your family’s financial well being?

Life Insurance
Disability Insurance
Critical Illness Insurance
Long Term Care Insurance
Group Insurance (business owners)
Key Man Coverage (business owners)
Shareholder Agreements (business owners)
Succession Planning (business owners)
Power of attorney
Representation agreement

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WEALTH TRANSFER

Inevitably the day comes for us all when it is time to pass on the wealth we have accumulated in our lifetime – we know that in the end we can’t take it with us. However, we know that if we don’t plan properly it is possible that the government could take a good portion of our wealth or our wealth could be distributed in a way that we would not have chosen.

There are many things we can do to ensure that our estate is handled as we want it to be, and there are ways to reduce the tax liability or at least potentially the cost of paying the government.